Employers, particularly in small business, that have a trusting relationship with their employees often eliminate the burden of monitoring time punches by giving authority to the schedule when running payroll. That is, instead of clocking in and out, employees are paid according to hours they were scheduled to work. When employees work a very consistent schedule and are honest, there doesn’t seem to be any harm in this, right? Wrong. It’s a terrible way to track employee attendance and it could cost you more than you ever thought. Here’s why.
Problem Number One: That’s Nice, but You Can’t Afford It.
Generous employers may not be especially worried about the possibility of overpaying their employees. While you are conscientious of spending in all areas of your business, if there’s a place where a few extra dollars ought to go, it’s to the employees you depend on to make your business operate. An additional perceived benefit is that employees are happiest when they feel trusted by their employer. But things are not entirely what they seem. You may be overpaying your employees considerably more than you ever imagined, and you probably can’t afford it!
Example: You have 12 employees who each work roughly 40 hours a week at ten dollars an hour. You use the schedule to calculate payroll. Each week, you have concise figures and running payroll is a breeze. You know that if your employees work more than their scheduled hours, they’d probably tell you, and you assume that you may be overpaying some weeks, but probably save yourself enough of your own time to make up for it by paying based on the schedule. You’re probably wrong. These costs will add up quickly. Between late arrival times, delayed returns from lunch breaks, and miniscule early departure at the end of the day, you might overestimate each employee’s time by just 6 minutes. If you do this every day, you overpay each employee by one dollar every day. That’s going to cost you more than $3,000 a year! Realistically, if you do pay employees based on the schedule, you know that you are overestimating your employees’ worked time by much more than 6 minutes, and it’s costing you much more than $3,000 annually. Really think hard about your staff. Don’t you have a great, hardworking employee who is consistently a little bit late (Disclosure: I am this employee at TimeForge). If so, you’re paying this employee for time spent hitting the snooze button! Even the most understanding employer can’t afford the excess costs. The best solution is to track attendance separately from the schedule in a way that keeps payroll simple and accurate (pssst… like TimeForge Attendance).
Problem Number Two: You Can’t Afford a Dispute, Because You’ll Lose.
In addition to potentially overpaying your employees, underpaying them is an even more serious concern. Using your schedule as the attendance will generally discourage employees from “floating the clock” or acquiring unnecessary overtime. However, determining time for hourly employees based on your schedule is legally irresponsible for your business. If you are sued by even one disgruntled employee for failure to pay the actual time that they have worked, you could very easily be in very, very hot water!
The law is pretty clear on tracking the attendance of hourly employees, and now more federal agencies than ever are involved with maintaining the integrity of these records. The Department of Labor requires that you keep accurate records of your attendance. If an employee does not work the time that is reflected on the schedule and you do not have means to justify your payroll, you could be fined.
Additionally, organizations such as your state’s workforce commision, the Department of Labor, the Social Security Administration, and the IRS may audit you to see if you are keeping accurate attendance records. These audits are only more stressful if you have been adjusting, or handwriting, the actual times worked by employees on the schedule. That is, if you’re modifying the schedule to show when you think employees worked, and an employee files a complaint, the conversation with the court will go something like this:
You: I don’t understand; my employee knows that we expect her to work during the time she is scheduled. No more, no less. That has always been our policy. If there was a problem, she should have just talked to me about it.
The court: But sometimes things happen that require employees to stay a few minutes late. Also, your policy doesn’t matter. Ours does. She was scheduled for 40 hours and she says she stayed 5 minutes late every day but you didn’t pay her overtime. I need to see the attendance records.
You: Here’s her schedule. We pay based on the schedule.
The court: I need to see her hours worked.
You: Those are the hours she worked, I think. On one day, she said she stayed late, so I modified the schedule.
The court: So even the schedule isn’t accurate now!? You lose! You owe her money AND you are now assessed a gigantic fine, and we’ll be auditing you often.
Problem Number Three: With the ACA, You Really Can’t Afford It.
Additionally, with the implementation of Obamacare, even MORE emphasis will be placed on accurate tracking of attendance. Your large employer status and whether you are required to provide healthcare for all of your full-time employees is dependent upon the number of hours your employees work. Every company will need to be able to verify that their status is correctly assessed. Fees for not complying with Obamacare are substantial and if you are not monitoring your employee attendance prudently, you may be a large employer and not even know it!
The Solution: Simple Attendance Monitoring
These are the primary reasons for many of the functions in TimeForge that protect the integrity of the schedule and attendance for your business. More than a few great TimeForge Scheduling customers have requested the ability to edit past schedules as a means to calculate attendance and run payroll. TimeForge does not offer this feature. To do so would jeopardize each customer’s business and our reputation as the absolute best folks to handle your labor data.
So, save yourself money and heartache; do not use your schedule as your attendance! It’s messy and it will only cost you in the future. If you’re concerned about tracking your attendance, contact TimeForge at [email protected] or call 866-684-7191. We will set you up with the right attendance product to keep your employees and yourself protected!